Restricting Free Competition: How Law and Justice Reinstates Socialism in Poland

It might seem that in Poland the experiences of the years 1945-1989 and then the civilizational advancement of 1989-2015 should clearly prove the consequences of introducing the principles of socialist economy. I do not wish to veer into a debate on the scale and the need for redistribution or the effectiveness of social programs conducted by the state. I also do not want to discuss which model is better: Anglo-Saxon or Scandinavian. I intend to focus solely on the principle of market competition, which works all around the globe – and the only alternative to which is socialist economy, monopolistic in its nature, within the framework of which in the name of various interests of entrepreneurs the state imposes a number of restrictions and limitations. Law and Justice seems to be going for neither the Anglo-Saxon, nor the Scandinavian solutions, nor any other type known from the Western market economies, but it instead, step by step, brings Poland back to the socialist system, enabling at the same time the emergence of a lobbying paradise, well known from Ukraine.

21st Century Serfdom

The first blow hit with the restriction of the rights of farmers and trading in agricultural land. As a rule, after an adequate act was passed by Law and Justice, only individual farmers can purchase such lands (thus natural persons owning land up to 300 ha, who are qualified farmers and have lived in a given administrative district – to which at least one parcel of the land is adjascent – for at least five years) as well as a small group of entities chosen by the legislator – including religious communities.

Although it will be no problem to transfer the land to a member of one’s family, when the children would want to sell the inherited piece of land, they shall face significant limitations. The reason for imposing such drastic restrictions in free trade of land is an irrational fear of having the Polish land bought off by foreigners. As a result, the real estate of many farmers has just lost some of its value, and any investment will become much more difficult.The Nowoczesna party has just issued a rational project of amending the act, the aim of which is to free trading in agriculutral land within the administrative borders of cities. The party’s intention is to eliminate the greatest absurdity from the act, which simply holds back a great number of investments in Polish cities. Although in the current political situation in Poland, this might be the only way to improve the situation in this regard, the entire act on trading in agricultural land shall be deemed a socialist aberration which limits property rights and freedom of trade.

Pharmacies for Pharmacists aka Disguisting Lobbying

This widely discussed for the past few months legislative act proposal is deemed controversial even by some Law and Justice MPs who refused approving it during a parliamentary session in January and sent it to be further amended by a respective parliamentary commission. It is difficult to evaluate this act in any other way than as an effect of aggressive lobbying of a part of pharmaceutical community which seeks a chance for a survival in significantly restricting free competition. Not being able to win the consumers over with the quality of their services when free competition is in place, some part of the community aggressively lobbies for a solution the aim of which is, in fact, the elimination of big companies from the market. An obvious result of such a solution will be higher prices of medicines.

According to the idea of Law and Justice MPs, only certified pharmacists (who will, additionally, be barred from setting up enterprises on a bigger scale) would be able to run new pharmacies. One person or corporation will be allowed to own no more than four pharmacies. Moreover, between the respective pharmacies there must be no less than 500 metres and at least 3,000 residents/customers shall be assigned per each post. We could not imagine a more silly regulation – if 150 people move away from one area, a pharmacistswould be forced to close down the pharmacy since the required level of 3,000 people would be no longer met. This would have a detrimental effect on local communities in smaller, depopulating towns – as a result, many people could be simply deprived of an access to a pharmacy in a close proximity to their homes. This anti-market solution is an obvious result of actions of a small lobbying group – which, in turn, shows how incapable of dealing with lobbying Law and Justice is.

Politicians Know Better What You Should Ride With

According to the planned new act on the market of local transportation services, it is local authorities, and not the customers, who will be able to provide transportation services. The act will, again, affect most of all the residents of small cities and provinces, where right now numerous private enterprises dominate the market and compete with each other.

The most controversial regulation of the new act seems to be a clause giving local authorities the right to grant a monopoly for a given area to one carrier. Together with the idea of signing long-term contracts, this would mean an actual elimination of any competition in the area chosen by these authorities. It is difficult not to see this provision as a consequence of aggressive lobbying. The result of such an application of the act would be the situation when after several years the roles will have to change. The local authorities will have no carriers to choose from when trying to assign a new contract. Who will lose the most? As usual in the case of limiting competition: the customers/residents, who will be forced to accept (most likely) poor-quality services.

Fall in Love with Smog

In summer 2016, President Andrzej Duda signed yet another act restricting free market – an act on wind farms. The act introduced a rule, according to which, wind farms cannot be erected in an area with close proximity to residential buildings (distance no smaller than ten times the height of a windmill, including its rotor and blades). In practice, this amounts to app. 1,5-2 km.

As a result, the regulation led, of course, to a significant decrease in the development of wind energy industry. At the same time, the development of this branch of energy industry and its opportunities to compete with, e.g. coal industry, was disrupted. Ironically, already a few months later Poles experienced how crucial it is to diversify energy sources and invest in ecological technologies – during winter months, the level of smog in many Polish cities exceeded all permitted norms and Poland became the leader in the global rankings in this respect.

Do Not Read This, You Might Vote for Law and Justice

The last example is the widely discussed proposal of introducing a uniform, obligatory price for all books, set a year before a publication is launched. It is yet another idea of how to limit free market and a result of lobbying mostly of small companies which believe that they will benefit from such a regulation. Would they be able to effectively compete with big chains which would then be unable to draw on the scale effect and offer lower prices? One thing is certain: the customer (a reader) will lose since newly released books will be more expensive. This will probably lead to a decline in readership in Poland.

Maybe small bookshops will benefit – although it is difficult to envisage how the decline in readership brought about by a sudden increase in prices shall not level the effect desired by the lobbyists out. I also do not uderstand why securing more expensive books and favoring the interests of publishing industry can be regared as the task of the government. Minister of Culture, Piotr Gliński, claims that the decisions were still not made definitely. Let’s hope that this time he was more assertive than usual.

Anyway, the trend presented above, which is clearly visible in the actions of Law and Justice, is extremely dangerous. Step by step, sector by sector, the party reinstates in Poland socialism and destroys free competition. Sometimes its decisions are guided by ideology, other times it acts under pressure from lobbyists, which it is unable to oppose. Regardless of the reasons, each time it is the citizens and the customers that lose.

The article was originally published in Polish on liberte.pl – a Polish magazine which promotes an open society, liberal economic ideas and liberal culture; and in English on 4liberty.eu– a platform for liberal thinkers from Central and Eastern Europe.

Blazej Lenkowski is graduate of International Relations at The Faculty of International and Political Science Studies of the University of Lodz; president of Industrial Foundation the publisher of Liberte!; entrepreneur.

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